Can I use Buy Now Pay Later as a budgeting tool?

Buy Now Pay Later (BNPL) services allow users to purchase a product or service at a shop or online and pay it back in interest free instalments. In addition to a form of payment, BNPL can also be used as a money management and budgeting tool.

Research published by BNPL service Zip showed that many of its customers are not only utilising the platform not as a form of credit but as a financial management tool. By taking advantage of all aspects of these services, consumers can maintain savings, earn extra interest and purchase large items that have not been budgeted for.

According to Zip, here are some of the top ways customers are using BNPL to organise their spending and save money:

Managing Cash Flow - You can use a BNPL to manage cash flow by controlling the outflow of money. Different BNPL brands offer alternative options for payback schedules, allowing you to plan ahead.

A Zip spokesperson explains: “If you don’t get paid consistently, a product like Zip Pay can help manage your cash flow as you can pay back your expenses interest free over time (T&Cs and other fees may apply). Remember, don’t buy now what you can’t afford to pay later.”

Controlling Spending - Many BNPL platforms allow you to implement spending limits. This means you can restrict unnecessary spending. Additionally, on some platforms, you can make sure purchases above the limit require approval, ensuring that the purchase is considered.

Complementing Your Budget - Large purchases can throw your budget off completely. BNPL services can help ease this burden by spreading the load of large purchases across several months to avoid dipping into your savings. Further, it lets you hold on to your money for longer (and, in turn, earn interest on money in your current accounts)

Budget Flexibility - BNPL allows you to pay emergency bills or make urgent large purchases that may crop up (for example, to replace a broken washing machine). Also, it can give you the breathing space to figure out how you might reorganise your finances to pay for something.

“When it comes to paying bills, it’s not unusual to experience shock when the lump sum comes, which is often where BNPL offerings, like Zip, can lend a hand. Being able to spread out the payments to better align with your income streams or pay cycles can help to manage that anxiety,” says Zip.

If you’re interested in learning more about some of the BNPLs in the market, head on over to our Buy Now Pay Later hub.

Disclaimer: This content is for information purposes only and does not consider your objectives, financial situation or personal needs. It should not be taken as constituting professional advice. All investments have an element of risk. Please consider the risks involved before you make a financial decision. Zip is not a financial adviser. You should consider seeking independent legal, financial and/or taxation advice from a qualified professional. Zip is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided in this website.